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The Specificity of General Human Capital: Evidence from College Major Choice

  • Ronni Pavan

    (University of Rochester)

  • Josh Kinsler

    (University of Rochester)

In this paper we develop a model to estimate the return to college major and to understand why students appear to give up part of their earnings potential by selecting less profitable majors. Starting from the empirical evidence that individuals who work in a job related to their major field of study earn significantly higher wages than those working in jobs unrelated to their major, we build a model in which part of the human capital accumulated while in college is specific to their field of study. This specificity of human capital may introduce a sort of occupational risk if the potential human capital is not perfectly observed by the agent at the moment of major choice. After rejecting the hypothesis that agents have perfect knowledge over their potential future labor market abilities, we show that this type of occupational risk helps explain why relatively few students choose science related majors.

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File URL: https://economicdynamics.org/meetpapers/2012/paper_1036.pdf
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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 1036.

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Date of creation: 2012
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Handle: RePEc:red:sed012:1036
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
  2. Montmarquette, Claude & Cannings, Kathy & Mahseredjian, Sophie, 2002. "How do young people choose college majors?," Economics of Education Review, Elsevier, vol. 21(6), pages 543-556, December.
  3. John Kennan & James R. Walker, 2003. "The Effect of Expected Income on Individual Migration Decisions," NBER Working Papers 9585, National Bureau of Economic Research, Inc.
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  6. Carneiro, Pedro & Hansen, Karsten T. & Heckman, James J., 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," IZA Discussion Papers 767, Institute for the Study of Labor (IZA).
  7. Shintaro Yamaguchi, 2011. "Tasks and Heterogeneous Human Capital," Department of Economics Working Papers 2011-06, McMaster University.
  8. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
  9. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  10. Joseph G. Altonji, 1991. "The Demand for and Return to Education When Education Outcomes are Uncertain," NBER Working Papers 3714, National Bureau of Economic Research, Inc.
  11. Magali Beffy & Denis Fougère & Arnaud Maurel, 2012. "Choosing the Field of Study in Postsecondary Education: Do Expected Earnings Matter?," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 334-347, February.
  12. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
  13. Salvador Navarro, 2011. "Using Observed Choices to Infer Agent's Information: Reconsidering the Importance of Borrowing Constraints, Uncertainty and Preferences in College Attendance," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20118, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
  14. Christopher Avery & Sarah Turner, 2012. "Student Loans: Do College Students Borrow Too Much--Or Not Enough?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 165-92, Winter.
  15. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  16. Pedro Silos & Eric Smith, 2012. "Human capital portfolios," FRB Atlanta Working Paper 2012-03, Federal Reserve Bank of Atlanta.
  17. Sullivan, Paul, 2006. "A Dynamic Analysis of Educational Attainment, Occupational Choices, and Job Search," MPRA Paper 861, University Library of Munich, Germany.
  18. Parent, Daniel, 2000. "Industry-Specific Capital and the Wage Profile: Evidence from the National Longitudinal Survey of Youth and the Panel Study of Income Dynamics," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 306-23, April.
  19. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  20. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "2001 Lawrence R. Klein Lecture Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 361-422, 05.
  21. McCall, Brian P, 1990. "Occupational Matching: A Test of Sorts," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 45-69, February.
  22. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
  23. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
  24. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
  25. Ronni Pavan, 2006. "Career Choice and Wage Growth," 2006 Meeting Papers 504, Society for Economic Dynamics.
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